What to Make of Mortgage Lending Figures?

Recent figures released by the Council of Mortgage Lenders (CML) have been interpreted as offering encouraging signs for the housing market. In short, the figures show that mortgage lending as a gross figure is at a six year high due to the number of first-time buyers making purchases in 2014. The overall gross figure for mortgage lending across the twelve months of 2014 was £205.6 billion, an increase of 17 per cent on 2013 when the gross figure was £176 billion.

The CML also reported that mortgage lending in December stood at £16.5 billion, down on the amount lent in December of 2013 but only by 1 per cent and unchanged when considered next to the November 2014 figure. So though the market is showing signs of cooling in the winter months, the broader picture is one of strength.

The figure is buoyed by the return of first-time buyers in significant numbers. The highest amount of first-time buyers since 2007 made purchases in 2014, around 300,000 in total, benefitting from competitive lending rates and schemes such as the Help-To-Buy initiative which has, since being introduced in April 2013, contributed to the purchase of over 41,500 homes in England with loans totalling £1.75 billion and averaging £42,239.

The CML statistics are focused on the gross lending figures. The number of actual mortgage approvals is another useful measure of the market – the gross lending can suggest an inflated picture of progress if the mortgages being approved are for predominantly larger properties.

The Bank of England mortgage approval figures show a similarly mixed picture to the gross lending, though. The actual number of sales made in 2014 was encouraging, up by 14 per cent to 1.22 million, the highest amount since 2007.

But behind this figure is a more complex picture. Approvals over the last 6 months of the year slowed considerably relative to the first half of 2014. The monthly average from January to June was 67,203 approvals before falling to 61,669 across the back half of the year. The December approvals figure was 60,275, a rise on November and the first rise in 6 months – but compared to the December 2013 figure this was down by 17 per cent.

Another set of figures recently released by the Office of National Statistics (ONS) points to a more worrying trend within the sales market. Although the number of first-time buyers rose and had a significant market impact in 2014, it is still well short of the half-million figure considered the norm in prosperous times.

The ONS report on homeownership since 1980 showed that whilst in the early 1990s one-in -three of 16 to 24 year olds could afford to buy a home, today only one-in-ten could do so, hence the reliance on the rental market and the pressing need for more affordable houses to be built in the UK.